Seadrill Limited

Hello everyone and welcome to CEDRAL's Q4 2022 earnings call and webcast. My name is David Warwick and I'm the Director of Investor Relations for the company. I'd like to start by introducing you to the CEDRAL team on today's conference call. Simon Johnson, President and Chief Executive Officer. Grant Creed, EVP and Chief Financial Officer. Leif Nelson, EVP and Chief Operating and Technology Officer. And Sameer Ali, EVP and Chief Commercial Officer. I will shortly hand you over to Simon, who will take you through an overview of the Q4 highlights, as well as touch on some of our corporate and commercial success over the quarter. Grant will then take you through our financial performance over the quarter and 2022 performance against our previously set guidance before handing back to Simon for some closing remarks, summarizing our strategy and outlook. Following the formal presentation, we'll be inviting questions from industry and sell side analysts. To participate in the Q&A session, we ask that you join the session via the conference call line. For those of you that are not tuning in via the webcast link, you will be able to access a copy of this presentation via the investor relations section of the CEDRAL website. This conference call is being recorded and a webcast replay of the call will be made available on our website shortly after. Before we commence, I would like to notify you of the disclaimer statement made on slide two. Simply put, we will be referring to forward looking statements related to the business and company that are not historical facts. Such statements and assumptions are based upon current expectations and are therefore subject to certain risks and uncertainties. There are many factors which could cause actual performance and results to differ materially. For further information, please take the time after the call to read this disclaimer and refer to the Q4 earnings report released earlier this morning. On that note, I will hand you over to Simon.

Welcome, everyone. Thank you for joining our virtual presentation today to discuss our Q4 2022 results. At the outset, I'd like to briefly clarify that, as outlined in our press release on 28 February in connection with filings made for our acquisition of Aquadrill, we chose to postpone this earnings release as a critical step in closing that transaction in the most expeditious manner. Therefore, with our Q1 2023 reporting scheduled for just over a month's time, we've shortened today's prepared remarks. Now to a few top line figures for the quarter. Full year EBITDA for 2022 was 265 million, which is at the top of the guided range. Fourth quarter revenues in EBITDA were lower than previous quarters, but this was anticipated and in line with expectations in relation to operating activity. In October, we closed our sale of seven jackups located in the Kingdom of Saudi Arabia, which allowed us to increase our liquidity and significantly deleverage our balance sheet. Since the transaction closed, we've paid down almost $600 million in debt under our second lien facility. Grant will provide some more colour on these topics in his prepared remarks. During the quarter, not only did we close our sale of the Saudi jackups, but we also signed an accretive agreement to acquire Aquadrill, a business with which we're very familiar, given our common history. And as you all have seen, just days ago, we closed this transaction. The management team and I would like to thank the employees of both companies for their efforts and contributions in closing the deal. Our ability to transact quickly and efficiently is becoming a hallmark of the Sea-Drill brand. We're very excited about the prospects this acquisition presents in today's buoyant rig market. Turning to our active fleet, including the former Aquadrill units, we now have 14 deepwater and harsh environment motors in operation, with the West Capella expected to begin its operations offshore Eastern Africa imminently, taking the total in operation to 15. Among the operating units are the West Jupiter and the West Talus, which have commenced operations with Petrobras in Brazil in December and January, respectively. Additionally, we have three benign environment jackups operating on bare boat charter to our Gulf Drill joint venture and a number of other units that we manage on behalf of other owners. As a reminder, the former Aquadrill units are not presently managed by Sea Drill, but our intention is to take control of these units at an appropriate time based on discussions with the existing managers, as well as the customers utilizing the services of these rigs. Finally, during the final quarter of 2022, we delivered good operational performance with high technical utilisation across the fleet. Our technical utilisation was recorded at 95%, while economic utilisation stood at 91%. Moving on to the next slide, the most notable event of recent months was our acquisition of Aquadrill, which we closed just a few days ago, as I previously mentioned. As a result, we've added four drill ships, one harsh environment semi-sub and three tender assist units to our fleet. With the sale of the seven jackups deployed in the KSA and the addition of Aquadrill assets, our fleet has become more exposed to the attractive ultra deepwater and harsh environment rig segments. The Aquadrill deal provides Seadrill with more open capacity in the ultra deepwater rig market in particular, where we continue to be encouraged by prevailing trends and day rates. Importantly, this capacity is on the water and does not require costly and lengthy rig reactivations. Our immediate focus is on seamlessly integrating Aquadrill into our business and we believe that we are uniquely positioned to do so given the shared history of Seadrill. We are very keen to move quickly with the integration in order to realise the significant synergies arising from the transaction and the management team firmly believe that the acquisition cements Seadrill as an industry leading offshore driller with critical scale. It enhances our free cash flow outlook and we expect it to deliver meaningful value to our shareholders through time. Now touching on market conditions on slide 5, 2022 was an inflection point for the offshore drilling industry and we continue to see positive developments right across the oil and gas sector. The fundamentals for offshore drilling remain favourable despite turbulent conditions in broader financial markets of late. The global energy crisis experienced through 2022 has brought to light the years of underinvestment in new and continued supplies of energy. EMPs have benefited from high energy prices for some time now and chosen principally to return the profits to shareholders. However, we are now seeing an emerging trend in their approach to capital allocation. Several of the large ISCs have indicated expansionary budgets for offshore drilling activities, with greenfield activity being a prominent beneficiary. Furthermore, we are seeing a clear preference towards high-end modern equipment, which plays well into the hands of CEDRAL's developing fleet. Strong demand is particularly evident in CEDRAL's key geographies, mainly Brazil and West Africa, where utilisation rates are being pushed to higher levels. While demand is a key driver, we believe that the lack of available supply of rigs, a function of fleet rationalisation over the last decade, to be a critical component of the market's continued positive momentum and trajectory through 2023 and beyond. The outlook for the benign ultra-deep water segment remains positive. with marketed utilisation standing around 95% for drill ships. The health of this segment is illustrated by leading-edge day rates, consistently in the $400,000 to $450,000 per day range. We now have two units in the harsh floater segment. Several units have already left the critical Norwegian market, and we see the demand-supply balance tightening further in coming months, improving outcomes for rig owners. With our expanded rig portfolio, we are well positioned to capitalise on new opportunities, We're excited about the market in the coming years and intend to reposition Cedral relative to its peers with a more consistent and concentrated fleet profile. I'll now hand over to Grant to talk you through the Q4 financial results in more detail. Over to you, Grant.

Thank you, Simon, and welcome again to all of you joining us today. We're delighted to report full-year EBITDA for 2022 of $265 million, which is at the top end of the guided range. Full year revenue of $1.1 billion and capex of $289 million were also within the guided ranges. Fourth quarter EBITDA of $41 million was in line with expectations and previous guidance, but lower than the previous quarter, primarily driven by idle time for the West Telus, which completed upgrades for its upcoming long-term campaign with Petrobras that commenced in early January 2023. Fewer rig operating days for the West Hercules, which concluded its operations in Canada and subsequently demobilized to Norway. And we did not benefit from a full quarter of operating results from the Saudi jackups following completion of the sale of that business in October. And I have a general comment in respect of P&L geography. Results related to the Saudi jackup business up until October 18 are presented as discontinued operations on the face of the income statement. And my final comment regarding the P&L, we expect EBITDA to significantly improve again in the first quarter of this year as we benefit from a full quarter of operations in respect of all four drill ships on contract in Brazil. Now onto the balance sheet. We had $480 million of unrestricted cash on hand at the quarter end, relatively high due to the proceeds received on sale of the Saudi Jackup business. Other assets decreased by $89 million, largely due to a combination of collections from Sonodral JV in respect of management fees receivable, amortization of favorable contracts, and receipt of demobilization revenue in respect of the West Hercules. Long-term liabilities decreased, both primarily in relation to debt prepayments, which I'll explain in more detail shortly. This was partially offset by mobilization revenue earned in relation to Jupiter, Carina, and Saturn, which is recorded on the balance sheet and recognized as income in the P&L over the firm contract term. And finally, assets and liabilities related to the Saudi business were classified as held for sale on the Q3 balance sheet. These were no longer on the balance sheet after the sale closed in October. Looking at our debt profile in a bit more detail, you'll see that we've been very proactive managing it following the sale of the Saudi business. Since the end of Q3, we reduced our debt stack by almost $600 million. First, we made a mandatory prepayment of $192 million in October at the closing of the sale, which was followed by a voluntary prepayment of $250 million in November. Post-period, we made two further voluntary prepayments of $110 and $40 million in February and March, respectively. All told, these prepayments have reduced the relatively expense of second lien debt by approximately 83%, from $713 to $117 million. With no change to the first lien facility or convertible bond, our total debt stood at $342 million as of April. Lastly, on the financials, we will not be providing full year 2023 guidance at this point in time. Our priority is providing consolidated financial guidance that includes the aqueduct business, and we intend to issue this in the near future. With that, I'll now hand back to Simon before we open the line for the Q&A.